All right. Welcome. Good morning, everyone. I'm Melissa Knox. I run the global software banking business here at Morgan Stanley. I am extremely excited to be here with Dave Barter, CFO of Cellebrite. Cellebrite is a leader in digital investigative solutions to state and local governments, federal agencies, enterprises. It's had a tremendous run. We'll talk about how the stock has performed, where you are today, some of the new solutions that you have out, leveraging AI and data. First, Dave, just give us an overview on the products that Cellebrite sells. There are three of them, three kind of main products, why don't you go into what you're selling on the Case-to-Closure platform, starting with digital forensic software, your Inseyets product. Super. Well, good morning, and thank you so much for having us here today. This is always great to be here. When you look at Cellebrite and our role in law enforcement, you know, as Melissa highlighted, there's the Case-to-Closure platform. That Case-to-Closure platform, when we think about law enforcement, really starts with the idea around the mobile device and specifically the idea that when you're looking at a crime, the mobile device tends to be the richest source of information. Our spectrum really runs starting with if you need to gain access to a device, which happens about half the time. Somebody's not willing to give up a password, so that's where we can actually step in. We have a pretty unique set of technology around the vulnerabilities around access, whether you're talking about a Google-based device like Android or you think iOS, even going out to Nokia and some of the feature phones. We have that ability. We understand the vulnerabilities, and it's usually not one vulnerability, but it's a series of vulnerabilities that lead to what we call an exploit. That actually allows us to gain access to the device, but that's usually not the whole answer. Usually, there's an element around how we run a full file extract. You might look at your phone and say, "Well, gosh, it only has a little bit of the data on it," and that's generally true. You have a lot of cloud services that are linked to your phones. That's exactly where we kinda kick in, and we help scrape everything that might actually be on your device or linked to your device, and that becomes the basis of how people start to approach an investigation. That's really hard to do. Just that in and of itself, taking the data off the device, this can be encrypted, data could have been deleted, it could be hidden, doesn't matter, and it's in different formats. Exactly. It, it could be everything from your Signal or your WhatsApp or Telegram to some of the more esoteric ones where people are using to communicate. You know, one of our superpowers is first the ability to go in and scrape, then you actually start to go through the decryption process, the decoding process, it's a series of steps that ultimately, you know, in the form of a discrete exploitations that allow us to actually start getting that information, organizing it, and starting to convert it into insight. That's really, you know, I'd say in kinda trick one and trick two are pretty powerful tricks. That kinda leads you into trick three, which within the Insights product, we have a component called Physical Analyzer. This is where the AI starts to kick in, where we get into image identification and classification. Think of it, if you're in law enforcement, if you want quick, actionable insights, that's where AI really comes in quickly. If you really wanna get, you know, kinda start to progress through the suite, this is where we start to take, go from digital forensics into the investigation side, and we have a case evidence platform called Guardian. Guardian has that ability to store all of your data so you maintain chain of custody. If you're concerned about a lawyer coming in and starting to press because there are some savvy defense attorneys in the world, this gives you full chain of custody to be able to go from that mobile phone or all the cloud services into starting to think about investigating and prosecuting somebody. Having the data repository, it does allow you to collaborate. It allows you to share from an examiner to a detective to now you're starting to think about a district attorney or somebody who's gonna be sitting in the courtroom. Within that, you're also starting to look at advanced cases around AI. This is where it really, I'd say, it starts to change the game for the company, where within that Guardian product, there's an AI viewer that really does advanced image classification. It also gets into starting to connect threads. Then we really, I'd say, start to wrap up our suite with Pathfinder. Pathfinder is an analytical platform. It's designed for 10 phones to hundreds of phones, where you can really go through and upload information if you're thinking about a fentanyl ring, if you're thinking about gang activity, maybe you're thinking about something that involves prisoners, you know, trying to run an exploit, and where you're getting access to hundreds of phones. Cellebrite Pathfinder has a lot of superpower in it in terms of it is AI because it, there is a strong AI component to it, where you're starting to be able to do translations. You can imagine variety of languages. You're starting to an element of, you know, there's a translation element of if people are speaking slang, it actually starts to really decrypt a lot of those threads very quickly. Then I'd be remiss if I actually didn't speak about Corellium, which we acquired on December 1st. Then more, most recently, as of a couple days ago, we're now into Drone Forensics. So we're super excited about that, just given, well, everything you're reading about now, that's becoming a real vector for all of law enforcement. You're selling a lot to these age ncies. How do you sell? Is this cross-sell opportunity? Do you come in with a platform, or are you buying these different modules and cross-selling? It's a great. You know, I think this is one of the elements that we love so much, where we have such a deep set of relationships. Every quarter, we certainly add logos. Those tend to be smaller adds, where it's somebody where within a potentially a branch office, they have a colleague, they need to start actually having forensics capability. Our initial land may be $10,000. You know, some cases a little bit more. Occasionally somebody who knows us well because they've used Cellebrite before might actually start a little bit larger. Principally, it is just continuing to expand. Whether you think about FBI offices or any police department, you know, they usually have to, you know, from a budgetary perspective, they gotta start somewhere. As they're actually getting value, it actually enables them to to start expanding. We are starting to actually play with some new tricks. Having, having been in the PLG motion before, we are starting to open up some products as we're rolling out some new solutions like our Investigate product. It's purpose-built for detectives and investigators. We've actually just started to give that away, and we, and we give it away in the form of using customers as design partners. They're going through and helping us harden it, and we kinda stumbled into the motion when somebody said, "You, you wouldn't be offended if we actually started solving crimes with your software?" We said, "Of course not." I said, "'cause we've already started. We've started. Now let's talk about some of the crimes. Sorry. Please. Well, and so-. Yeah -and that's what we love, you know? Yeah we see, some of our new agentic solutions where people are solving crimes, you know, we are in this new phase of actually starting to experiment with a PLG or a free tier where design partners are actually hardening the solution. They're starting to solve crime, and that's allowing us to invite others in- Mm-hmm -to go do great things for the community. The use cases are quite broad. You know, when you think about what you're solving or what some of these agencies are solving, they're some of the most high-profile cases that are out there. The Nancy Guthrie kidnapping case is being run on Cellebrite, the first Trump assassination, the Bryan Kohberger, Idaho murders. These types of cases are being worked on with Cellebrite. Just talk about the expansiveness of the use cases. What can you uncover here? The element that I maybe I guess is kinda touching us is there are no limits. We had a customer, they had been a long customer, they started to expand actually in the platform motion that we were describing. They said, "Gosh, we bought this new product from you," I kinda have to protect the customer because they said at this point in the investigation, they just asked us to be a little bit more just more reserved in our comments. They said, "We bought this new product from you in December. The first case that we put up, we put it in, used the AI components of the product. We quickly found that there was a class of people in their community that were being exploited. They quickly used the AI to identify more and more victims, and then they ultimately actually, through all of the AI components and the amount of data that they were able to scrape, they actually realized it became an international crime. Within 24 hours, they were able to go from country to country and found the, they apprehended the person, but they were able to, quite frankly, solve a case that before would've been almost impossible to get after. That's, you know, and that's what we're starting to see with the, with the solutions as people get engaged in a platform. Just let's double-click on the AI component here. You talked about the data. Talk about what you're collecting. Clearly, this is super proprietary. You're taking it directly off these devices that can be accessed. The elements of the data, the relationships, because you're not it's not just what's here, but you're able to then use, you know, external data as well to form relationships, what people are doing on social media sites and kinda build a web of connectivity. Maybe talk about the power of the data, the proprietary nature of it, the actual AI that you're using. Are these your own models that you're using? Yep. Third-party models, and then as it gets incorporated into the products, how you're monetizing that. Yeah. I think that one of the elements that's probably not well understood about Cellebrite is that even before you get to data, there's almost an infrastructure play to it. When we think about, you know, a device and what's going on, it's not a USB-C that goes in. We actually have specialized appliances, no different than the Drone Forensics company. Drone Forensics has its own dedicated appliance for which we actually start the basis of what's the exploit that's gonna remove the information to start getting it. As we talk about frequently, there is elements of encryption that go with that data. It is a, I'd say Cellebrite is a little bit unique in the sense that you start off with an appliance. You go into some pretty unique pieces of data because it is encrypted, and you have to go through an exploit process to actually start to unlock that data. It does become unique data in the sense that, you know, when we think about our job, our focus is both lawful investigations, and we also think about it in terms of ethical AI. To get our information, you are going through a search warrant process with the folks that we actually partner with in law enforcement. When you think about a search warrant, a search warrant isn't blanket data. There are a number of restrictions that go with that data. Learning how to work with that data is tends to be a very important one because it could be time delimited, it could be space. You know, there are a variety of elements that go into that warrant. Let's talk about that. Y ou know, there's concern obviously over surveillance. Yep. You're in the forensics piece of it. Talk about the lawful nature of this and when you come in and how you differentiate between surveillance and forensics. How do you get the approvals to go do this? What's necessary? Yeah. We, what we maintain, and it was actually an important element for me when I interviewed with the company, was learning we're actually not trying to be an enterprise software company where we might sell in 180 or 185 countries. We actually have our own specific KYC policy that we use, and that KYC policy runs by country, by customer. Our general view is it's actually pretty important to us of to whom do we sell within law enforcement, but equally, I'd say we apply this to defense and intelligence. As an example, we're very specific around, for example, Customs and Borders. Okay, well, that's a use case that makes a lot of sense to us. When we think about officers that are at the border, who need to be able to extract information from somebody who's trying to immigrate or go through the customs process. We think of that as an area where it's very lawful for a customs official, which happens regularly, to be able to say, "Gosh, may I please see your phone? I would like to learn a little bit more," you know, when somebody's going through an investigation. Clearly, that person has the ability to refuse and say, "No, I'm not gonna give you my phone." That obviously takes them down a different path if they're probably not admitted to that country. That's generally our approach, is we think there's a lawful way to engage, whether you're on the law enforcement side or on the defense intelligence side, around protecting communities and protecting nations. You generally need to have a search warrant or the owner's consent. Exactly. Yeah. Okay. That's actually, you know, maybe a great segue even in our enterprise business, where it's less than 10% of our business. If you are a Fortune 2,000 company, or even somebody like a Deloitte or a PwC, we will sell you solutions. We won't sell you the ability to unlock a solution. The unlock technology is very reserved for very specific people who we'd say, "Gosh, you know, we think you're gonna be upholding our KYC policy and our ability to, you know, approach lawful investigations." If you are at a Fortune 500 company, and you're doing potentially a cyber investigation, well, as long as you have employees' access, then yes, we'll give you access and the ability to run a full file extract and find out, gosh, was your network compromised or was somebody's device compromised? What sort of relationship do you have with Apple, Google, and I know you're making investments in Android right now, to kinda go after that operating system even more? Just talk about where you are with the different operating systems and how those companies view you. Well, it's funny. I think our CEO was with a senior member of the Apple staff not too long ago, and I think it's one where there is an element where from an OEM perspective, I think both Android and Apple do go out and say, "Gosh, trust and privacy is important." At another level, I think they look at what we do for a living as, quite frankly, very complementary to what they do because it allows them to proceed in the market with their brands. At the same time, I think, I've never talked to Tim Cook or Sundar about this, but My sense is letting being assisting criminal activity is not high on their agenda. I think it is a, you know, to an extent, a very complementary relationship in terms of, I'd say, what our engineering and software development does vis-a-vis what they're trying to accomplish. I think it's one where, I guess maybe to your, you know, kind of your point, we've always been the market leader on all Android. You know, I think when it comes to iOS, I think we have a, you know, a good number two competitor in the form of Magnet, where it's a little bit of a cat and mouse game with Tim Cook. I think when it comes to Nokia and feature phones, we tend to bat above our weight as well. You know, I'd say in two of the three areas, I think we're the undisputed leader. You know, certainly in iOS, you know, it's, Tim Cook keeps us all working pretty hard. You and everyone else. Let's get into your customer base. 7,000 customers across local police departments, federal agencies, governments. Kinda what's the breakout within the group? Who are you primarily selling to? You said 10% enterprise, but between kinda the local police departments, federal government, what does that look like? Yeah, it's interesting. I mean, here we sit in San Francisco. They're a wonderful customer of ours, and you can almost, you know, go from Sacramento all the way down to San Diego, and you find actually a lot of Cellebrite customers. There is nothing but opportunity in the city of San Francisco. Well, I think the mayor's doing a really nice job, and we hope he, we hope to continue helping him. The interesting part about our business that most people actually don't appreciate is it's actually to your, maybe your suggestion. State and local government actually is the biggest part of our business, that is actually where we really shine, in the sense that they have the greatest needs. That tends to be that area where we do land and expand. That's been, again, actually grows faster than our federal business, and it's an area where we find a tremendous opportunity. It's actually what compelled us to think about getting into drones. With the Open Skies Act and the fact that now, cities and municipalities have the ability to start running their own drone programs, we think actually that's gonna be a tremendous opportunity for us to be good local partners. You know, for us, the strength of our business really starts off on state and local government. We do very well at the national level, and I think we talked about that being a, you know, within the, kind of the U.S. and Canada, which we refer to as our North America federal business. That tends to be about 20% of our business. Just across the globe, state and local governments or provincial governments, or if you think about the U.K., they have about 55-60 kind of provincial operations. Each level of partnership at that level tends to work really well for us. What does it look like when you come in to one of these government agencies, police department? Are you replacing something that's there? Do you work side by side with other things and start adding over time? Just talk about kinda what the landscape looks like and what the land and expand is. It's funny, over the last 10 years, I think that's been the really, the maybe the birth of the industry in the sense that, if you go into any major police department 10 years ago, it was, you know, whiteboards, and forensics was a, was something that somebody was probably doing in a supply closet, where they were just getting into the business. Now forensics actually has a prominent place, but it is continuing to crawl across. I think the, maybe the great observation that somebody, you know, had made in the, this was several years ago. When the Trump assassination occurred, it took four hours to drive the phone to a place where the forensics could actually start. I'd say with the rate and pace of crime, I think every police department is looking for having advanced capabilities at their fingertips. This is becoming, in terms of the ability to solve crime, having access to that almost instantaneous insight is where people are going. It's one of our account, right, just maybe to kind of play this forward, one of our AEs was, we were just debriefing on a recent visit. He said, "Gosh, I was visiting with the prison system of a major state." They said, "What we really want is the ability to have instantaneous insight. When a parolee sits down, we would like to be able to run that phone through our forensic system. Mm. And be able to know within 10-15 minutes have they violated their parole or not." I think that's increasingly the, just kind of the vector of how people are pursuing, whether it's Customs and Borders looking for instantaneous insight, a detective being able on the front lines when an accident happens. One of our great customers said, "We're pretty good at our jobs. When we ask for phones, we normally get them." So people are looking for that level of immediate insight to go track signal versus noise, where do I need to go focus because, you know, minutes and hours matter so much. Mm-hmm. That I think is what actually compels people where they actually say, and this is maybe the network effect of a Cellebrite of, "Hey, I've been able to Cellebrite a phone. I've been able to Cellebrite a report." The brand starts to actually kind of carry through the system of law enforcement. It's a verb. It's Cellebrite, it may not make it to cocktail parties, but I guess within that community of law enforcement. We're gonna start it now. Start the trend. We're gonna Cellebrite our phones. Any questions on the business? We're gonna turn to business model financials. Questions from the audience on the core business? Good. Why don't you talk. Let's talk a little bit about the business model. You've had some changes from legacy products, into Inseyets and from on-prem to cloud subscriptions. Just talk about what the business model is today and kinda where you are with the migration into the Inseyets product. Well, even before I go into insights, I think one of the things that is probably least understood or appreciated about Cellebrite is the fact that the company, rewind the clock over 10 years ago when it really got into this business, actually start ed off as a perpetual business. Ultimately, the company, kind of about halfway through went into term licenses. Lately, as we think about everything that we're doing on our case evidence platform, it's all consumption. Increasingly, you know, I'd say the element that we've done very well is actually kinda continuing to evolve the business. One of the reasons we use ARR as the metric is the revenue ultimately reflects kind of a transition, I'd say, from a very old school company to being very, just very leading edge in terms of being able to have a consumption component, which I think is really what sets us up nicely for being able to go to customers and have an AI offer is, well, we've gotten you comfortable with meters and the idea that we will meter the unlocks. Meter access to phones. We'll meter ultimately the amount of terabytes that you actually will move through because these phones are kind of beefy. They come with a lot of it, a lot of data, we've actually been able to get people accustomed to that. You know, kind of the biggest part I'd say is the underlying layer that says from, if I were to use the old, kind of the classic expression I grew up with, licensing and pricing for us has really, I'd say, become a good discipline in terms of moving our customers through having from the single perpetual all the way to having a set of consumption meters. Mm-hmm. You have predictability and upside with the model. I would say we do, and moreover, I think what we've aligned with our customers on is value meters. Our customers actually greatly value the idea that says, "Hey, I run cases, so I need to be able to run extractions, or I need to be able to unlock a device, extract a device, and then ultimately I have terabytes to petabytes of data that is associated with cases." When we've gone through our pricing work as we were preparing for some of the new agentic products, I think that was a good affirmation for us that says, "Gosh, this work, the spade work that was invested on the meters actually is really starting to work, where our customers are actually able to plan and think that way." That, you know, actually gave us more confidence as we're starting to think about how to price some of the new offers that we're working through. That, you know, at a fundamental level, there's good physics in terms of how our customers think about the world. Can you give us some data points on where you are with some of these migrations from the legacy to the new products- Yep. -from on-prem to cloud? Absolutely. I think our shift with Inseyets has been very successful. I think over the last several years, we've gotten up to about 55%. Last year, about 30% of our customers moved. We kind of handicapped it this year. My general view on transitions is that we're kind of in that phase of Middle-earth, and we'll figure out that it could be 25-30 poin ts more. Could be, you know, a little more, could be a little bit less. I think what we're intrigued about is, one, I'd say that the migration to the Inseyets has gone very well. That allows us to retire some of our legacy offers around the extractions and just get everybody on one set of products relative to how we think about our unlock and our access. That's been very positive. It does come with a small ARR uplift, which we've kinda shared with investors, that out of the net new ARR every quarter, we get about a 10% uplift when people migrate. This is why we really are focusing a lot on the growth engine, where we think nearly 20% of our ARR will come from our growth products this year. You know, the business is really changing very quickly in terms of how much of the growth is driven by insights versus some of these newer products across Cellebrite Guardian, across Cellebrite Pathfinder, Corellium, which again, we just acquired, and the drone company. This is, you've told an amazing story here about a product capability platform that's really differentiated. It's hard to do. It's widely applicable to a number of use cases. You have proprietary data, and when I translate that into the financial metrics of the company, you're almost, you know, $500 million in ARR, $480 million in ARR, growing 17%, 34% free cash flow margins. Pretty amazing. Trading at 5x revenue. What's the group missing here? You're different. Yeah. When we talk about the baby being thrown out with the bathwater, this is one that should not be thrown out. What does the market have wrong about the story? Yeah, I think it's, you know, for us, you know, as a, as a company that when we, you know, kinda came out to the market, I'd say we really, you know, kinda came out to the market almost just given our heritage, where half of our company is Israel. I think people thought of us almost as a cybersecurity company, and I don't think they actually appreciated the elements around what does Cellebrite mean to public safety. You know, I think that's the element that I think we have an opportunity to ultimately do a better job of saying, "Gosh, how integral are we to state and local governments? How integral are we to Customs and Borders and helping people protect the perimeters of their, of their nations? I think we have an opportunity just to almost, I'd say, reset how people perceive us both as a vertical company, but actually, how do people perceive us both as a vertical company in an AI era where, I'd say a very unique appliance plus pretty unique data is translating into unique and actionable insights. I'd say that's the part that we're looking forward to being able to share more of in the sense that as you think about our investigator product, as you think about the agentic products that are, you know, all in trial mode with customers, we're pretty encouraged about where that takes us. Yeah. You know, our general view is, you know, last year we had a decel in the business as a result of what happened with the federal government when Trump came in and he took over Biden's budget. He kinda changed that, and that ultimately compressed growth by about four points. We feel like we have a pretty credible path to taking our 17% and starting to re-accelerate it. You know, part of that is a little bit around customers, a little bit around the products that we have. Maybe talk just briefly on that point, you're accelerating growth. You've come in, you know, you've tightened up the guidance ranges. We're guiding to accelerating revenue growth, 18%-19%. You've committed to keeping free cash flow margins over 30%. Just what are those growth levers? How much is kinda new customers, expansion, new products? You've done some acquisition that you can cross-sell. Just kinda lay out those building blocks to accelerating growth? Yeah, that's a great question. I think when you think about it from a customer perspective, because our lands tend to be on the smaller side, new logos might represent 1-2 points of incremental growth in any given year. It does tend to be more of a customer-based motion. You know, for us, I think I looked at it and said, I think we tried to lay out a scaffolding in the last earnings call to say insights just because it is our largest and most mature product. I think that will continue to drive upper single digits in terms of our overall growth as we think about that 18%-19%. We get pretty excited about Guardian, which has been growing over triple digits the last six quarters. With the ability that as a case evidence platform, everyone is moving their data in, we think that data plus the AI layer on that product will continue to lead to strong growth. Pathfinder has, you know, ultimately bats way above its weight in terms from an analytical perspective, and that ultimately contributes to growth. We think some of the newer products like Corellium ultimately kinda come in, and Corellium's, you know, has that ability to add a couple points of growth, even as a small product. With $16 million of ARR that we acquired, it's growing at a pretty healthy clip, and has the ability to grow almost as fast as Guardian if things work out the way we think it could. Drone Forensics, I mean, really very nascent business, but boy, with what's going on in the world right now, drones just continue to become more important, we'll give some perspective on the next earnings call. I'd say the last area that we're excited about is we actually do think gross retention is gonna continue to climb as we really get our plays dialed in. Last year we finished at 91%. We think this year could ultimately be 92% or 93%. You know, I think what we like about the model is there's, one, a lot of focus around our customers, but a lot of ways we win. I think as we thought about the scaffolding, thought a lot of ways to ultimately kind of get to the lower end of the guide, a lot of ways to get to the upper end, and then kind of beat and cross through it to get back to a two-handle on growth. Excellent. Well, tremendous execution. Congratulations- Well- -on what you've built, and thank you for being here, Dave. Appreciate it. Thank you so much for having us. This was fantastic. Melissa, really good.